About one-third of multifamily loans nationwide are Fannie Mae or Freddie Mac loans, according to a CrediFi report on multifamily lending trends released today, suggesting that the question of whether the agencies will remain tethered to the government could have a significant impact on the stability of the multifamily segment as well as the commercial real estate industry at large.
The report found that financing for multifamily has been more stable than other major property types in 2018, staying flat as other property types declined.
But one factor that could rattle the multifamily segment is the major changes that may be afoot for Fannie Mae and Freddie Mac.
The question of a shake-up has become more pressing due in part to comments made in January by Federal Housing Finance Agency acting director Joseph Otting that the regulator would shortly be announcing plans to remove the government-sponsored enterprises from conservatorship. Otting’s comments, which pushed up shares of Fannie Mae and Freddie Mac, came after similar remarks over the past two years by Treasury Secretary Steven Mnuchin and the chairman of the Federal Reserve, Jerome Powell.
“I would like to get them out of conservatorship,” Mnuchin said about Fannie Mae and Freddie Mac in December. And Powell has called for Congress to encourage private capital to be funneled into Fannie and Freddie, in a bid to avoid the kind of taxpayer bailout that took place during the global financial crisis.
The push away from conservatorship has some real estate professionals concerned.
“Housing is the backbone of the economy,” Richard Katzenstein, senior vice president and national director of Marcus & Millichap Capital Corp., told Multi-Housing News. “Privatizing GSEs would definitely change the industry.”
But Mark Calabria, the nominee for FHFA director and an aide to Vice President Mike Pence, may instead be prioritizing a different plan to infuse the agencies with capital, American Banker reported in March.
That plan, the article said, involves allowing Fannie and Freddie to retain more of their earnings following renegotiation of an agreement that currently requires the agencies to use much of their profits to pay for their bailouts.
“I support the concept of having significantly more capital at the GSEs,” Calabria told the Senate Banking Committee at his nomination hearing in February. But whether that capital comes from the agencies’ own profits or from private sources, as Powell has suggested, remains to be seen.
Find out more about financing trends in the multifamily segment. Read CrediFi’s multifamily trends report.
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